Soapbox: Redistribute wealth, but do it simply to do it right

Jan. 31, 2014

Philip Cafaro

Democrats hope to make rising economic inequality an issue in this year’s congressional elections, as shown in President Barack Obama’s State of the Union speech. The problem is real enough. Incomes for most Americans have stagnated in recent decades, while most of the wealth generated by a growing economy has gone to the wealthy. So far, however, the solutions proposed fall far short of what is needed to successfully address the problem.

Democrats’ main proposal is to raise the federal minimum wage. According to one recent analysis, raising the minimum wage from $7.25 to $10.10 an hour would lift about 5 million Americans out of poverty. That’s well worth doing. But it won’t make any difference to the majority of American workers, whose wages have stagnated in recent years but who make more than the minimum wage.

Democrats’ prescription for flat wages also includes improving access to education. That’s also a good idea, which could marginally increase equality of opportunity. But educational reforms are unlikely to reverse rising income inequality. Even with a college degree, the average carpenter or sales clerk won’t earn as much as the average banker or corporate executive.

Enact the whole raft of Democratic proposals today and one year from now economic inequality will still have increased. Something more is needed. In a mature capitalist economy, wealth naturally becomes ever more concentrated unless government steps in forcefully to redistribute it.

I propose a new federal tax on the top 1 percent of income earners: those earning $395,000 a year or more. Say 15 percent on all sources of income (including capital gains) in addition to whatever they already pay. The money gathered would not be used to fund new government programs, or pay down the national debt. Instead it would be collected by the government, divided into equal shares and paid out to the majority of American workers, say, all adults among the bottom 90 percent of wage earners: those earning $82,000 a year or less.

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My proposal would not create complicated new programs designed to reduce economic inequality indirectly. It would not increase the size of the federal government or lead to wasteful government spending. The government would just collect and redistribute the money and leave it to us to spend as we please.

My proposal would not reward layabouts or give people something for nothing. To get your share, you would have to be employed or have a solid history of employment. But it would straightforwardly dispense with the fiction that an unmanaged free market fairly divides up society’s wealth. It would say to those who do this country’s work — nurses and policemen, construction workers and teachers, garbage workers and pastry chefs — you deserve a fair share of our society’s steadily increasing wealth. Here it is.

Unlike the timid measures you will hear proposed by Democrats in coming months, my proposal would actually make a real dent in inequality. Initial calculations suggest a 15 percent tax on the wealthiest 1 percent would net about $168 billion. Divided and redistributed that would mean a $1,200 check for every one of the 140 million American workers in the bottom 90 percent.

The 1 percent would never miss that money. Many poorer Americans could use it. We would all benefit as a country by reducing income inequality. Let’s do something about it.